Private Credit Managers Sell Public BDCs to Scale Growth

Private credit managers are increasingly utilizing the sale of publicly traded Business Development Companies (BDCs) to accelerate growth and divest underperforming assets. While these vehicles are typically valued for their perpetual capital and fee structures, shrinking direct lending volumes and a decline in investor interest have left some funds struggling, particularly those trading below net asset value.

BC Partners has consolidated several funds to expand its scale and diversification. Chief Executive Ted Goldthorpe stated that combining two of its publicly traded funds expanded the firm's scale and enhanced portfolio diversification. Other large asset managers, including Ares Management and Blackstone, have historically used BDC acquisitions to rapidly grow their businesses and provide liquidity for private funds.

In contrast, some firms are treating smaller, challenged funds as distractions. BlackRock's TCPC fund sold half of its portfolio to Pantheon in August to reduce leverage following regulatory probes into valuation practices. This trend highlights a divide between larger firms pivoting toward retirement accounts and those using consolidation to maintain competitiveness in the private credit market.